Community Housing Fund

Prospectus

July 2018

Homes England

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July 2018

1

Contents

Ministerial Foreword4

  1. Introduction5

What is Community-Led Housing?

Routes to delivery

Bids for community-led housing development

  1. Fund principles8

What will the funding cover?

Local authority funding to support community-led housing development

Conversions and refurbishments

Innovation

Limits on payments

Who can apply?

How the Fund will operate

  1. Bidding for funding13

How to apply

Homes England Portal

Bid requirements

Bidding – next steps

  1. Assessment criteria15

Value for Money

Deliverability

Strategic fit

Know Your Customer requirements

Equalities, diversity and health inequalities

State Aid

Application timetable

  1. Contracting19
  1. Payment of grant20
  1. Contacts23

Prospective bidders should note that this document relates only to the Community Housing Fundthat will be delivered by Homes England. This covers all of England outside London.
The Government is working with the Greater London Authority (GLA) to develop a similar scheme in London (see

Ministerial Foreword

The rate of house building in England is now the highest we’ve seen in all but one of the last 30 years; last year, we saw 217,000 new homes built. We are on track to achieve the Government’s aspiration for a million new homes by the end of 2020 and another half a million by the end of 2022. In order to deliver the homes that we need – and in the places that they are needed – we need to maintain the current momentum and still go further. That is why the Government is putting in place a package of radical new measures which will raise delivery rates to on average 300,000 per year by the mid-2020s. Achieving this bold ambition means that we will need to realise the potential offered by all sectors of the housebuilding industry.

The community-led approach to housebuilding galvanises local support and is driven by the commitment and energy of the very individuals and communities that it will benefit. This local support means that this sector is able to deliver locally affordable new homes in places and on sites where commercial speculative house builders cannot. As a result of the close engagement and creativity of local people, the community-led model typically delivers high design quality, high standards of construction and energy efficiency, and uses progressive, innovative building techniques. It supports the smaller housebuilding companies and helps sustain the local economy by providing homes that are affordable at local incomes. For all of these reasons, the Government wishes to see the community-led house building sector grow.

Despite the benefits of community-led housebuilding, the sector in the UK remains very small compared to many other countries in Europe and North America, currently delivering only around 400 units per year in England – less than 0.3% of total housing output. With the right kind of investment, this output could increase several fold over time to more closely match that being achieved elsewhere. Through the Community Housing Fund, the Government is making a further £163m available up to March 2020 across England, creating a once-in-a-generation opportunity to set the sector on that trajectory. This fund will provide ordinary people across England with an additional and realistic option for meeting their housing needs, delivering lasting benefit for themselves and their communities.

I hope that everyone within the community-led housebuilding sector will seize the opportunity presented by this fund. In this way, we will see the community-led sector flourish and make a real – and permanent – difference to the way that housing is delivered.

Chapter 1: Introduction

1.The objectives of the Community Housing Fund(the Fund) are to:

  • increase housing supply in England by increasing the number of additional homes delivered by the community-led housing sector;
  • provide housing that is affordable at local income levels and remains so in perpetuity; and
  • deliver a lasting legacy for the community-led housing sector in the form of an effective and financially self-sustaining body of expertise within the house building industry in England.

2.In order to ensure that we are able to fully support these aims, the Fundwill be split into two phases. The first phase, launched with this document, will support applications for revenue funding for project-specific activities that support development of community-led housing proposalsand capital bids for local infrastructure projects that will result in housing developments that meet the criteria for being community-led.

3.Bidding for capital funding to support the costs of building new community-led housing schemes will be covered under the second phase of the Fund. See paragraph 11,below, for further details.

4.Support will be available from the Fund across both phases over the twoyears from 1 April 2018 to 31st March 2020. This is in addition to £60m[1]funding that has already been allocated directly by Government to 148 councils in December 2016.

5.The Fund will be managed and delivered by Homes England in England (outside London). The Government is working with the Greater London Authority (GLA) to develop a similar scheme in London (see

What is community-led housing?

6.Community-led housing is about local people playing a leading and lasting role in solving local housingproblems, creating genuinely affordable homes and strong communities in ways that are difficult to achieve through mainstream housing.

7.In order to ensure that the schemes supported by the Community Housing Fund are truly community-led,proposals should ensure that:

  • meaningful community engagement and consent occurs throughout the development process. The community does not necessarily have to initiate and manage the process, or build the homes themselves, though some may do;
  • the local community group or organisation owns, manages or stewards the homes and in a manner of their choosing, and this may be done through a mutually supported arrangement with a Registered Provider that owns the freehold or leasehold for the property; and
  • the benefits to the local area and/or specified community must be clearly defined and legally protected in perpetuity.

8.The community-led housing sector comprises a wide range of ownership, occupancy and management models including (but not limited to) community land trusts, co-operatives and cohousing. Within the sector arange of tenures are possible, including shared ownership, rent, and market sale. The community-led housing sector is adept at developing specific ownership and tenancyarrangements that best suit the local circumstances and preferences and this diversity and pragmatism will be recognised in the delivery of the Fundwherever possible.

9.Leasehold houses –The outcome to the consultation on unfair practices in the leasehold market waspublished in December 2017[2].The Government is working to bring forward legislation as soon as Parliamentary time allows to prohibit new residential long leases from being granted on houses, whether new build or on existing freehold houses. In bringing forward legislation, the Government will consider further whether there are particular cases where leasehold houses can be justified and, if they can, the Government will work with sectoral partners to ensure that leasehold houses are provided on acceptable terms to the consumer.

Routes to delivery

10.Broadly speaking, there are 3 main routes to delivery for community-led housing:

  • Group-led: Grassroots ‘start-up’ groups responding to housing need or demand, or people seeking to deliver their own homes.
  • Extension of community based activity: Existing community based organisations with local roots decide to provide housing in addition to their current activities, or increase their existing provision, for and on behalf of the local community.
  • Developer-Community partnership: A local authority, landowner, housing association or small builder wants to provide housing that benefits the local area in perpetuity. They access community-led housing expertise to recruit ‘founder members’ from within the community and support them to take over ownership, stewardship and/or management of the homes, or they may support an existing group or organisation to deliver their ambition.

Bids for community-led housing development

11.Homes England is inviting applications from organisations wishing to develop community-led housing for the funding on offer in Phase One.

12.As noted above, funding for Phase One of the Fundwill not cover bids for the capital build costs. Groups with affordable housing schemes that are sufficiently progressed so as to be ready to apply for capital subsidy for affordable housing products may be able to bid for funding through the Shared Ownership and Affordable Homes Programme 2016-21 -

13. It should be noted that there is no guarantee that success in applying for early stage set-up costs (“seedcorn funding”) would lead to the award of any further funding towards development costs, including any capital funding sought from Homes England.

Chapter 2: Fund principles

What will the funding cover?

14.Phase Oneof the Fundwill make grants available to eligible organisations to help cover the revenue costs of project-specific activities that will support development of community-led housing proposals, and the capital costs of local infrastructure projects that will result in housing developments that meet the criteria for being community-led. Examples of eligible uses of grants include:

Revenue costs

  • Community group capacity-building, including seedcorn funding to get started.
  • Project-specific professional fees and costs, including feasibility work, design work.
  • Planning applications, business planning and project management.

Capital costs for infrastructure

  • Development of associated infrastructure which will support community housing development, which may include:
  • access roads/roundabouts to open up a site;
  • site remediation or flood attenuation; and
  • utilities.

15.Prospective applicants should be aware that, in order to deliver value for money in respect of the available funds, Homes England will need to limit the total amount of central government funding made available to any individual project. Any funding awarded under either element of Phase one of the Fund– or from other central government sources –will need to be taken into account by Homes England in the assessment of applications for further funding from the Fund. Homes England will not, however, apply a strict cap on the amount of grant funding that any one project may receive under the Fund (subject to the recipients compliance with State Aid requirements, where relevant – see paragraph 68).

16.The Fund will be delivered in a way that is consistent with the objective of increasinghousing supply in England and delivering value for public money.Funding will therefore not be awarded for schemes that are likely to proceed without funding. Groups applying for funding under Phase One should note that capital funding for the development of community-led housing under Phase Two will not be available for schemes that would be delivered by the market on a commercial basis.

17.If, under Phase Two, funding is requested for a scheme on a site developed as market housing and delivering affordable homes provided under a S106 agreement, the homes receiving support from the Fund will need to be additional to those that would be delivered under the S106 agreement alone.

Local authority funding to support community-led housing development

18.In addition to the costs listed above, funding will be also available to local authorities who wish to support community groups looking to develop community-led housing proposals in their areas; for example, to employ staffto provide advisory services, information and support to groups.

19.Where a local authority is applying for funding and has previously received funding from the Community Housing Fund (for example, through the one-off allocation in 2016), Homes England will, in assessing any application, take account of the use to which that previous funding has been put.

Conversions and refurbishments

20.In addition to new build homes, the Fund will support activities which will lead to the conversion or refurbishment of existing buildings for housing where there is evidence of need for this form of development.

Innovation

21.Homes England recognises that some of the best developments are designed using a degree of innovationin response to particular characteristics of the local area or the needs of specific groups.When developing community-led housing schemes,prospective bidders are encouraged to consider recent publications and research, to develop new ideas and concepts, and to build on appropriate good practice to develop schemes that are innovative in terms of design, delivery, management, tenure, funding and location.

22.In particular, through this fund, we are keen to see proposals that show a commitment togood design, use of innovative housing construction productssuch as modern methods of construction (MMC), and make use of innovative funding mechanisms.

Limits on payments

23.Homes England will notapply a strict cap on the amount of grant funding that any single project may receive under the Fund. It is not expected, however, that the Fundwill cover 100% of the total costs of a bid. Bidders will be expected to demonstrate that they have maximised other sources of funding (such as cross-subsidy or joint working with local partners) to lessen reliance on central government funding. For applications for revenue funding our expectation is that groups should contribute at least 10% of the estimated costs of developing the community housing proposal.

24.Revenue costs associated with providing housing related support services for homes delivered as a result of this fund, which would otherwise be provided through the welfare system/Universal Credit, are not eligible for support under this fund.

Who can apply?

25.Bidding is open to all organisations which are, or intend to become, constituted as a body corporate[3], or an equivalent form of constituted body. Eligible organisations include (but are not restricted to):

  • a registered charity;
  • a Company Limited By Guarantee;
  • a Community Benefit Society
  • a Co-operative Society;
  • a Community Interest Company;
  • an organisation of another type operating as a social enterprise and principally reinvesting their surpluses for social benefit;
  • a Registered Provider; or
  • a local authority.

26.Local authorities or Registered Providers may apply on behalf of community groups and, in those cases, the lead bidding organisation will remain directly accountable for the funds, where appropriate.

Registered provider status

27.Because Phase One does not entail the provision of grant directly towards the construction costs of affordable housing, it is not a requirement for organisations bidding under Phase One to be a registered provider of social housing.

28.It should be noted, however, that organisations who intend to be the landlord of completed low-cost rental properties funded by Homes England capital grant, either through future phases of this fund or any other Homes England affordable housing grant programme, must be - or intend to be-registered as a provider of social housing with the Social Housing Regulator before completion of any developments funded through those programmes and any payment of funding. Full details of how to register are available online at:

29.Organisations are encouraged to consider the implications of seeking registration with the Regulator and to familiarise themselves with the ongoing obligations of being a Registered Provider of social housing. Information on that can be found here and here Fees now apply to registered providers – the initial fee is currently £2,500 (payable on successful registration) and there is an annual fee dependent on the numbers of units a provider has. Further information can be found here Homes England is unable to provide grants towards the cost of an organisation becoming a Registered Provider of social housing.

30.Organisations would also need to consider alternative plans should their application for becoming a Registered Provider of social housing not be successful.

31.The requirement to be a Registered Provider of social housingdoes not apply to organisations that will not act as the landlord of low-cost rental property. Where an organisation is delivering homes for low-cost homeownership (Shared Ownership), for example, there is no requirement for that organisation to be a registered provider.

How the Fund will operate

32.Phase One of the Fund is broken down into twoprincipal elements:

  • Applications for revenue funding for capacity building and pre-development costs, including revenue grants to local authorities to support community groups.
  • Capital bids for associated infrastructure costs which will support community-led housing development.

33.Eligible organisations may apply for one or more of the elements of the Fund. There is no restriction on the number of bids that one organisation can submit(subject to the recipients compliance with State Aid requirements– see paragraph 68)

i) Applications for revenue funding for capacity-building and pre-development costs,including revenue grant to local authorities to support community groups

34.Under this route, organisations can apply for revenue funding to support a wide range of activity which will support the preparation and instigation of community-led housing proposals. Appropriate costs may include:

  • the costs of forming a corporate body
  • feasibility studies
  • surveys
  • architects fees
  • legal fees
  • training and capacity-building

35.Funding will be made upon the attainment of specified payment milestones as set out in Chapter 6 (Payment of grant).